Carbon Trading and Allowances: 5 Global Trends in the ICAP 2026 ETS Report

Updated on 6 October 2026. Global ETS figures, five key trends and the EU ETS2 timeline have been updated using ICAP's 2026 report. Original charts are retained for historical comparison.

Trend 1: Global ETS Expansion and Emerging Markets

ETS emissions coverage, 2005–2025 (source: ICAP Status Report 2025)

According to the ICAP 2026 Status Report launch announcement, 41 ETSs are operating worldwide, covering 26% of global emissions. Jurisdictions with an ETS account for 63% of global GDP. Japan, India and Vietnam are launching national systems in 2026, and 14 G20 members now have an ETS. Emerging markets continue to adopt designs suited to their industries, including emissions intensity benchmarks and hybrid models combining trading, offsets and carbon taxes.

The chart above and comparisons below show the 2025 market structure (source: ICAP Status Report 2025). For 2026 system counts and coverage, see the ICAP Status Report 2026. Systems vary in scale and sectoral coverage, so companies should identify those applying to their operations and supply chains.

Although these expansions can help countries manage emissions, price is another essential consideration for any ETS.

Trend 2: Price Dynamics Across Emissions Trading Systems

ETS revenues by system (source: ICAP Status Report 2025)

ICAP's 2026 report states that global ETS revenues reached a record of nearly US$80 billion in 2025. Revenues can support low-carbon transition, innovation and affected households and businesses. Sources: Introduction to the ICAP Status Report 2026, Full report, pages 26–28.

Carbon prices across ETSs (source: ICAP Status Report 2025)

EU EUA prices (source: 2025 State of the EU ETS Report)

The 2026 report compares 2025 price performance and longer historical series, explaining that prices vary with current and expected allowance scarcity. Key factors include:

• Economic activity and emissions demand: Changes in economic activity and energy demand affect the allowances companies need.
• System rules: Changes to caps, offset rules and market stability mechanisms alter expectations of allowance supply and demand.
• Other climate and energy policies: Policy interactions also influence carbon prices and should be assessed separately for each system.

When comparing carbon prices in US dollars across countries, exchange rates also matter: even a fixed local-currency price can change when converted into dollars. Companies should assess costs under their applicable allowance rules rather than use a single global carbon price. Source: ICAP Status Report 2026, page 26.

Clarification: Carbon Credits vs Carbon Allowances

• Carbon Allowances: Emissions quotas allocated to companies or countries within an emissions trading system. In simple terms, they represent the right to emit. Companies can use allowances to cover emissions. If emissions exceed their allocation, they must buy additional allowances to comply.
• Carbon Credits: Certificates representing emissions reductions from external projects, such as tree planting or renewable energy. Companies can purchase these credits to offset part of their own emissions.

Trend 3: Sectoral Expansion

Sector coverage across ETSs (source: ICAP Status Report 2025)

The 2026 report shows existing ETSs expanding into maritime transport, buildings, transport fuels and waste, but implementation schedules vary. The EU's second emissions trading system, ETS2, has been postponed to 1 January 2028, while allowance auctions still begin in 2027 and monitoring and reporting obligations remain in effect. Companies should distinguish system launch, auction and data reporting dates. Source: ICAP Status Report 2026, Announcement of the One-Year Postponement of EU ETS2.

Trend 4: Use of Offsets

Offset mechanisms across ETSs (source: ICAP Status Report 2025)

First, an Offset Mechanism allows companies to invest in domestic or overseas emissions reduction projects, such as tree planting or renewable energy, to generate Carbon Credits and use them to offset emissions they cannot reduce themselves. This can achieve emissions reductions and often lower costs. However, these projects require rigorous verification to prevent greenwashing.

According to page 31 of ICAP's 2026 report, of the 41 operating systems, 21 allow offsets with quantitative limits, 5 allow offsets without quantitative limits, and 15 do not allow them. Three systems permit international offsets; this is no longer limited to South Korea. Eligible credits and limits are not interchangeable across systems. For example, the 2026 report lists California's offset limit as 6% and China's national market limit as 5%, but companies must still check the relevant year and eligibility conditions. Source: 2026 Report Comparison of Offset Eligibility.

When planning offsets, companies must verify project eligibility, credit vintage, geographical restrictions and quantitative limits. A carbon credit is not necessarily eligible for compliance in every ETS. Completing an accurate emissions inventory first enables companies to determine their actual allowance and offset needs.

Trend 5: Opportunities Amid Challenges

ETS trends illustration (source: ICAP Status Report 2025)

The 2026 report emphasises that ETSs need stable legal frameworks, designs aligned with net-zero targets, and revenue use that supports low-carbon transition and affected groups to endure political and economic volatility. Continued expansion also increases market fragmentation risks, making international cooperation and shared good practices more important. Companies assessing long-term competitiveness must also consider interactions between free allocation and carbon border adjustments. Source: ICAP Status Report 2026 Executive Summary.

To address these challenges and prepare early, Taiwanese companies should prioritise the following:

• Build a Sound Understanding of Carbon Allowances and Trading

Understand how emissions trading systems operate and the core concepts of allowances and trading, while distinguishing primary reduction measures, such as internal emissions cuts, from secondary measures, such as carbon trading. Where resources permit, work with domestic and international carbon market experts on regular training to build practical capabilities and address market fragmentation.

• Prioritise Carbon Inventory Data Quality

Establish standardised carbon management systems to record and track all emissions accurately and maintain reliability through third-party verification. Without this, companies may mistakenly buy unnecessary allowances or credits, wasting valuable funds.

• Reduce Internal Emissions and Prepare for External Markets

Companies can introduce internal carbon pricing, treat emissions as a cost and set specific targets, such as a 20% reduction by 2030. Improving energy efficiency, upgrading equipment and adopting intelligent management systems can reduce internal emissions and strengthen future carbon market competitiveness. Companies should also monitor trading and offset markets, assess carbon leakage risks, such as relocation to Southeast Asia, and develop regional cooperation or CBAM response strategies to maintain competitiveness.

Conclusion

As global carbon markets expand, ETSs are becoming an important tool for low-carbon transition, with increasingly mature mechanisms. Despite challenges including fragmentation, carbon leakage and free allocation, ICAP's recommendations support international cooperation and market integration. Stronger carbon credit quality standards and effective carbon border adjustment mechanisms can further advance global emissions reduction goals.

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References

• Emissions Trading Worldwide: ICAP Status Report 2026, ICAP, 2026/04/14 (global ETS systems and data for 2026).
• ICAP Full Status Report 2026, pages 26–28 on prices and revenues, and page 31 on offsets.
• EU officially adopts the 2040 climate target, postpones ETS 2 by one year, ICAP, 2026/03/10.

Image sources: ICAP Status Report 2025; 2025 State of the EU ETS Report.

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